Here's how hard it is to afford a home today vs. 25 years ago
2025 U.S. real estate predictions
Zillow predicted a more active market with additional inventory for 2025, giving buyers more room to negotiate. However, homebuyers should expect some turbulence with fluctuating mortgage rates, even as more homes become available. Alana Mann, President of The Statesman Group of Companies, joined LiveNOW from FOX to discuss.
For decades, owning a home has symbolized stability and success in the United States for many Americans.
But according to a new report, that dream is fading fast for millions of people in 2025 amid soaring home prices, stagnant wage growth and tougher lending standards.
The home improvement company Fixr collected data on mortgage rates, home prices and the median household incomes over the last 25 years to analyze home affordability.
Data was extracted from several sources, including the Federal Reserve Economic Data (FRED) database, the U.S. Department of Housing and Urban Development (HUD), the U.S. Census Bureau and Zillow.
Housing prices increase nearly 200%
By the numbers:
According to the data, the average 30-year mortgage rate sat slightly higher than today’s average 25 years ago, between 7% and 8%, but homes in the U.S. cost an average of just under $120,000, about a third of what they are today.
A for sale sign is displayed outside of a home for sale on August 16, 2024 in Los Angeles, California. (Credit: PATRICK T. FALLON/AFP via Getty Images)
The median U.S. home price has skyrocketed 197% since 2000 – from $119,730 to $356,002 – while the median household income has grown only 40%, from $70,020 to $97,800.
What they're saying:
"Accounting for the changes in both income and home prices, buying a home today is more than twice as expensive as it was in 2000 in relative terms," the report said.
Since 2000, home value increases have outpaced median household income growth by nearly 500%, the data found. A standard 20% down payment today is 73% of the median income, more than double the 34% it totaled 25 years ago. Mortgage rates today are around 1% lower than they were in 2000, but the monthly payment is still almost three times as high as it was then.
RELATED: Less than a third of Americans expect to buy a home in the next 5 years, poll finds
The data also revealed that affordability varies widely by region, but some states have seen sharper changes than others. Hawaii, California, Washington D.C., Maine, and Idaho lead the nation in price-to-income ratios.
Meanwhile, the smallest price-to-income ratios are West Virginia, Iowa, Kansas, Mississippi and Ohio.
Bottom line: Buying a home now is significantly more difficult than it was 25 years ago – more than twice as expensive as it was in 2000 in relative terms.
Homebuying challenges in 2025
Dig deeper:
Today’s home prices and incomes are contributing factors to homebuying challenges, but according to the report, there are other underlying causes, as well.
The report said that real estate investment is one underlying cause.
According to Redfin, the number of homes bought by investors peaked in the third quarter of 2021. Investors make rentals more readily available, but they contribute to decreased for-sale inventory.
Some billionaire investors park their wealth in real estate to take advantage of tax breaks and appreciation, which, in return, decreases the housing supply and can contribute to higher rent averages.
To make matters more complicated, mortgage qualifications have also tightened since the housing market crash in 2008. While these have been considered generally positive changes that help ensure homebuyers can actually afford to make their monthly payments and reduce the foreclosure rate, they also make purchasing a home more challenging.
Trump signs executive order to address housing affordability
The backstory:
In early 2025, President Trump signed an executive order aimed at addressing the housing affordability crisis, which included plans that could create more affordable housing opportunities on federally-owned land, as well as loosen building regulations, which, reportedly, could reduce new construction costs by 25%.
The Source: The information for this story was provided by Fixr, which used data from several sources, including the Federal Reserve Economic Data (FRED) database, U.S. Department of Housing and Urban Development (HUD), the U.S. Census Bureau and Zillow. This story was reported from Los Angeles.